Rose v. Bank of America

MEMORANDUM AND ORDER ON DEFENDANT BANK OF AMERICA,
N.A.'S MOTION TO DISMISS

F.
DENNIS SAYLOR IV UNITED STATES DISTRICT JUDGE.

This is
a dispute concerning a foreclosure. Plaintiff Bruce Rose has
not made a payment on the mortgage loan on his home since
2007. Bank of America, N.A. (“BANA”), the
mortgagee, now seeks to foreclose. Rose has brought suit
against BANA and two others under Massachusetts law seeking
to enjoin the foreclosure, recover compensatory damages, and
obtain declaratory relief.

BANA
has moved to dismiss the complaint in its entirety. For the
following reasons, the motion to dismiss will granted in part
and denied in part.

I.
Background

Unless
otherwise indicated, the facts are set forth as alleged in
the complaint.[1]

A.
Factual Background

According
to the complaint, Bruce Rose is a mentally disabled
African-American man who lives at 22 Pompeii Street in
Roxbury, Massachusetts (“property”). (Compl.
¶ 1). Defendant BANA is the successor-in-interest to
Countrywide Bank, N.A. Defendants Eastside Mortgage and
Option One were involved in the origination of the loan and
mortgage that are the subject of this lawsuit.

In
2006, Rose refinanced the mortgage loan on his property on
two separate occasions. First, on February 24, 2006, he
refinanced the loan with Option One. (Id. ¶
13). Second, on April 25, 2006, he refinanced with
Countrywide. (Id. ¶ 14). He borrowed $439, 000
from Countrywide in the second refinancing. (Id.
¶ 31). Eastside acted as the mortgage broker for both
loans. (Id. ¶ 14). The note with Countrywide
provides for a maturity date of May 1, 2036, and for
acceleration of the loan in the event of default. (Note, Def.
Ex. A ¶¶ 3(A), 7(C)). The complaint alleges that
the loans were negative amortization loans with payments that
increased to an unaffordable amount over time. (Compl.
¶¶ 31-32, 49).

The
complaint alleges that Eastside, in collusion with the other
defendants, falsified documents, made fraudulent statements
to induce Rose to refinance, and forged Rose's signature
on the mortgage applications, among other things.
(Id. ¶¶ 15-25). It further alleges that
defendants used predatory lending practices to target Rose to
induce him to accept a loan that he could not afford.
(Id. ¶¶ 8, 11).

About
fourteen months after Rose refinanced his mortgage for the
second time, he defaulted on the Countrywide loan.
(Id. ¶ 43). He has not made payments on that
loan since at least July 1, 2007. (Id.). On
September 18, 2009, he received a notice of a mortgage
foreclosure and sale of the property. (Id. ¶
44).

The
complaint alleges multiple defects concerning the foreclosure
process, including allegations that BANA does not hold the
original note, has not made an offer to modify the loan, and
has not recorded an affidavit certifying compliance with
Mass. Gen. Laws ch. 244, § 35B in the registry of deeds.
(Id. ¶¶ 42, 46-48).

B.
Procedural Background

On
September 22, 2009, Rose brought suit against the three
defendants named here in Suffolk County Superior Court.
(State Court Compl., Docket No. 9-3). That complaint alleged
eleven counts arising out of the origination of the loans at
issue here.

On
February 25, 2011, Rose filed a voluntary chapter seven
petition for bankruptcy. (In re Rose, Bankruptcy No.
11-11563 (Bankr. D. Mass. Feb. 25, 2011)). On May 24, 2011,
the bankruptcy court filed an order granting a discharge to
Rose. (Bankr. Docket No. 11). In February 2012, Rose moved to
reopen the bankruptcy case in order to add the state-court
lawsuit as an asset of the estate. (Bankr. Docket No. 15).
The court granted that motion. (Bankr. Docket No. 20).

Thereafter,
the trustee negotiated a settlement of the state-court
lawsuit with two of the defendants in this case, BANA and
Eastside. Under the terms of the settlement agreement, BANA
and Eastside agreed to pay $16, 500 to the bankruptcy estate.
(Settlement Agreement ¶ 2, Bankr. Docket No. 45). In
exchange, the bankruptcy estate, on behalf of Rose, agreed
that he “unconditionally and irrevocably remises,
releases, and forever discharges BANA and Eastside . . . from
any and all suits, . . . claims, . . . grievances, and debts,
of any nature whatsoever . . . concerning, relating to, or
arising from the Loan, the Claims, and/or the Action,
including, but not limited to (a) all claims relating to or
arising out of the origination, handling, processing,
servicing, or administration of any aspect of the Loan; and
(b) all claims that were, or could have been, asserted in the
Action and/or any other proceeding concerning any aspect of
the Loan.” (Id. ¶ 2).

In
addition, the agreement contained a covenant not to sue that
provided that Rose would not “commence . . . any suit,
arbitration or other proceeding . . . arising out of,
relating to, or based upon, any claim released pursuant to
the terms of this Agreement.” (Id. ¶ 6).

On June
4, 2013, the trustee filed a motion in bankruptcy court
seeking approval of the settlement agreement. (Bankr. Docket
No. 45). Rose filed an objection to the proposed settlement
agreement on the ground that the trustee was not entitled to
“compromise future rights which were not raised in the
complaint, and which would eliminate any defenses in the
state court as to a wrongful foreclosure action based upon a
lack of standing the alleged lender has.” (Bankr.
Docket No. 52). On July 10, 2013, the bankruptcy court held a
hearing concerning the motion. At the hearing, the trustee
represented that, despite the broad language of the
settlement agreement, the agreement did not waive defenses
that Rose may be entitled to raise concerning foreclosure.
(Audio Recording of Hearing, Docket No. 59, In re
Rose, Bankruptcy No. 11-11563 (Bankr. D. Mass. July 10,
2013) (on file)).

Counsel
for BANA was also present at the bankruptcy hearing, and
represented that the settlement agreement did not waive
Rose's right to raise defenses to foreclosure, but
instead addressed only claims concerning the origination of
the loan. (Id.). Counsel further represented that
although a foreclosure action against Rose had previously
been commenced, that action had been stayed pending the
resolution of the bankruptcy petition. (Id.). She
stated that in light of that history, any “foreclosure
based claims” raised by Rose in defense to a
foreclosure action, such as a claim based on improper notice
of foreclosure or a claim that BANA failed to properly assign
the loan, do not relate to the state action and would
constitute “new claims” that “wouldn't
have anything to do with the original civil claims.”
(Id.).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
bankruptcy court approved the settlement agreement subject to
the representations by the parties that it applied only to
the origination-based claims brought in the state-court
action. (Id.). The Court entered an order granting
the motion by the trustee to approve the settlement
agreement, and further stating, ...

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